How Important is Brand Recognition of a Broker/Dealer to an Advisor’s Productivity?

How Important is Brand Recognition of a Broker/Dealer to an Advisor’s Productivity?

A recent Wealth Solutions Report survey found that 86% of wirehouse financial advisors believe that the brand recognition of their firms help them to be more effective in gaining new clients.1

This overwhelming belief that national wirehouses provide a distinct client-servicing and business-building advantage to financial advisors is cited as one possible reason for why the predicted wave of wirehouse advisors moving to independent broker/dealers has not occurred.

So, is there value in being backed by a recognizable national brand name? Let’s consider that question.

Financial Advisor Satisfaction with Wirehouses

If wirehouse advisors are so happy, then why did a J.D. Power 2021 survey of advisor satisfaction indicate wide displeasure with their wirehouse relationships? For instance, this survey found that 34% of advisors reported reduced levels of support from the home office, with 29% saying their business was disrupted during the pandemic.1

In fact, three of the four largest wirehouses ranked below the average score of overall financial advisor satisfaction in this same J.D. Power survey.2

Client Satisfaction with Wirehouses

Only one of the top wirehouses scored a client satisfaction rate above the average rate for all full-service brokers, and that was only by two points on a scale of 1,000.3

Clients are not only expressing their dissatisfaction, but they are voting with their dollars. In the 10 years following the 2008 credit crisis, client assets at independent firms went from being about $1.2 trillion less than client assets held by wirehouses to equal ($7.18 trillion).4

Unfounded Fears

Making the leap from a wirehouse to an independent broker/dealer is unquestionably a big decision. For many wirehouse advisors it represents exchanging the comfortable for the unknown.

But for those who have made the transition, the outcome is rewarding—very rewarding. According to a 2020 survey of financial advisors that transitioned to a new broker/dealer, 96% reported they were happy with their decision to move and over 30% said they experienced asset growth post switching.5

The most rewarding chapters in an individual’s life (e.g., marriage, having children, starting a new business) often begin with a leap into the unknown—a decision to move out of a personal comfort zone and meet the challenge of change.

Humans will frequently make up reasons to justify staying in place, and perhaps this belief that the brand recognition of their current wirehouse firm is a benefit to advisors (however tenuous the idea is) is simply a rationale that validates a financial advisor doing nothing.

Sources:

  1. https://wealthsolutionsreport.com/2021/09/30/oppenheimers-joan-khoury-employee-fas-benefit-from-backing-of-well-established-firm-brands/
  2. https://www.businesswire.com/news/home/20210707005022/en/Wirehouse-Wealth-Management-Firms-Struggle-to-Keep-Advisors-Satisfied-Through-Pandemic-and-Beyond-J.D.-Power-Finds
  3. https://www.jdpower.com/business/press-releases/2020-us-full-service-investor-satisfaction-study
  4. https://citywireusa.com/registered-investment-advisor/news/rias-vs-wirehouses-10-charts-showing-the-state-of-play/a1233561?i=4
  5. https://institutional.fidelity.com/app/proxy/content?literatureURL=/9899914.PDF

Please reference disclosures: https://blog.americanportfolios.com/disclosures/

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